Testing & Validating Your Market Assumptions
There are three distinct phases of risk in a startup's life-cycle: Product, Market, & Growth.
Product Risk - can you build it?
Market Risk - does anyone want it? can you get it to them?
Growth Risk - can you scale it and make lots of money?
The cost and challenge of mitigating Product Risk is dropping.  I believe the cost and challenge of getting through Market Risk is increasing proportionately because of the relative ease of building a product.
The majority of pitches I am seeing these days make the leap from having a product to assuming that the market wants your product. Â This assumption that there is market demand for your product is not tested and validated using Lean Startup Customer Development principles. Â Many founders are talking Lean Startup, but very few pitches I'm seeing have hard data on things like Customer Acquisition Costs and clear distribution strategies for their product. Â In the absence of testing & validating, you're proposing a field of dreams strategy - if you build it they will come.
In the diagram above, I refer to this as the Field of Dreams Gap - an unvalidated customer acquisition & distribution strategy.  In the new world where developing a product is no longer difficult, the challenge is going to be: does anyone know about it? and do they care?
One place to start is validating this strategy is understanding Growth Hacking, and a great starting point for that is Thomas Knoll's answer on Quora. The diagram above on the stages of risk includes data from Dave McClure's post, Moneyball for Startups.
